Seems like all across the board graphics seem to have hit a plateau, and there is more emphasis now on making realistic effects and physics, rather than improving graphics quality. I doubt the Xbox 3 and PS4 will be the equivalent leap in graphics that the Xbox 360 and PS3 were over the Xbox and PS2, and there will be more of a focus on making them more efficient and easier to develop for. Hopefully this has the effect of making the systems cheaper so we don't see launch prices of $500 and $600 again.
Even looking at PCs... is there much of a difference between DX10 and DX11? Not that I can tell.
The plateau is all in the cost of development. Only a handful of console games really look anywhere near as good as they could, and that is even more true for PC games. Crysis would look like shit compared to what would be possible in a fully optimized high budget title on modern PC hardware.
Game developers simply can't afford the cost of developing assets, hiring the programmers, and QA required to make such a game anymore. Maybe if they cut out their advertising budget or voice actors, but that would hurt them in other areas.
I don't see this as a problem that's going away any time soon. If the next gen of consoles have fairly high specs we will see a good increase in quality because it'll be easier to make those high end graphics, and it will help PC game graphics a lot too. I can't tell you if the next gen of consoles will be high end either, I think it could go either way at this point.